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Amazon Shares Drop 2.6 Percent As Centralization Alienates Suppliers

Esther Kim | Mar 08, 2019 | 16:00

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Amazon suppliers received a lesson in centralization on March 7 after the e-commerce giant abruptly began canceling huge numbers of orders in a profits push. 

Amazon: We ‘Saw Opportunity’

As Bloomberg reported, quoting a statement from Amazon, the company wants to increase returns at the heart of its e-commerce operations. This has involved fundamentally altering the supply line, forcing even long-time sellers to sell products directly on its marketplace instead of using Amazon as a middleman.

This, reports say, results in reduced costs, as suppliers themselves foot the bill for issues such as storage and shipping. Amazon also takes a commission from each transaction.

“We regularly review our selling partner relationships and may make changes when we see an opportunity to provide customers with improved selection, value and convenience,” the statement reads.

The knock-on effect for suppliers, perhaps predictably, has already touched a nerve. As Bloomberg notes, given purchase orders agreed months in advance, seismic changes from Amazon can easily trigger chaos.

“If you’re heavily reliant on Amazon, which a lot of these vendors are, you’re in a lot of trouble. If this goes on, it can put people out of business,” the publication quoted Dan Brownsher, CEO of a consultancy counting around 50 Amazon vendors among its clients, as saying.

At press time, Amazon’s share price was down by close to three percent on the day.

Can Decentralization Tackle Monopolies?

As Amazon has grown to achieve a practically worldwide monopoly, the perils of relying on a giant centralized partner will ring true for those businesses which have adopted an alternative ethos.

Nonetheless, decentralized marketplaces have yet to achieve widespread popularity. Efforts to take on the e-commerce giants have so far seen little progress, with highly-anticipated offerings such as OpenBazaar failing to dent consumer habits.

“You should be able to buy and sell using cryptocurrency… if you get crypto, you should be able to spend it… you and buy whatever you need for your daily activity,” the platform’s founder, Washington Sanchez, told cryptocurrency advocate Tatiana Moroz’s podcast the Tatiana Show in January.

Sanchez is overseeing a diversification of OpenBazaar’s core offering, branching out into related software as part of parent company OB1.io.

What do you think about Amazon’s change of strategy? Let us know in the comments below! 

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